The latest data from the British Bankers Association (BBA) shows that the number remortgages has fallen and there is only slow growth in the number of new mortgages being taken out.
Figures just released show that the number of new mortgages for house purchases approved rose very slightly in May to 30,509 from 29,747 in April.
May saw a drop in remortgage activity with the BBA reporting that the number of remortgages approved its’ members fall from an average over the past 6 months of 24,571 to 21,519 in May.
It is thought that the fall in remortgage activity is due to borrowers believing that interest rates will not rise as quickly as there were previously expected. This change in sentiment has reduced the number of borrowers who want to move to a fixed rate mortgage.
Depressed housing market
According to at least one leading expert the latest data is likely to further significant falls in house prices.
Howard Archer, Chief UK and European Economist with IHS Global Insight said that given this activity, “we expect house prices will end up declining by some 10% overall by the middle of next year.” This figure is from the figure seen in 2010. But many people who bought in 2007 and 08, when house prices peaked will see more dramatic declines, potentially pushing thousands into negative equity.
He added: “This implies [house prices] will fall by around 5-8pc from current levels depending on which house price measure you take.”
“On top of that persistently high unemployment, elevated debt levels and still significant difficulties in getting a mortgage (particularly for first time buyers) do not bode well for house prices.”
The latest survey by the Royal Institute of Chartered Surveyors (RICS) provided further bad news for the housing market. The RICs survey indicated that more houses are coming on to the market, which could lead to an oversupply and reduce prices still further.
The same survey also showed that enquiries from potential buyers also dipped in May.